Singapore is the latest country to announce joining a controversial American law aimed at uncovering the secret financial assets of US taxpayers after the city state was criticised on the international stage.
The move follows the UK, US and Australia singling out Singapore as playing host to a number of suspicious companies and trusts which could be used to evade taxes.
In a bid to show the world that the country is not home to dirty money, the authorities have announced that it will double the number of treaties it has signed to 83 countries with whom it will exchange tax information.
Currently only 41 countries are on the list but the new additions include neighbours Taiwan, Malaysia, Thailand as well as Israel and Germany.
The big step for the authorities though is news that they will sign up to the Foreign Account Tax Compliance Act (FATCA) which forces foreign banks and financial institutions to hand over details of all US taxpayers who have more than $50,000 in assets.
The deadline for FATCA’s implementation is next January and growing numbers of countries are now signing up, though others, such as Germany and Russia, are dragging their feet.
However, the announcements will cause alarm bells to ring in Singapore’s booming financial services sector which have cornered the market in offshore banking in recent years.
The sector is now so big that one financial research firm has predicted that Singapore will soon race past Switzerland for providing the world’s largest offshore banking centre.
There is been a huge inflow of wealth from rich people attracted by the highly developed financial services sector, low taxes and a stable government.
So much so, that the assets under management in Singapore have rocketed from £33 billion in 2000 to £362 billion in 2011.
Pascal Saint-Amans, who is head of tax policy at the Organisation for Economic Cooperation and Development, said the recent announcements were understandable and added: “Singapore is keen to secure its reputation for being a financial centre but does not want to rely on dirty money.”
Criticism from the UK, US and Australia came after they announced that they were looking at a huge amount of data which has been handed over regarding many of the world’s offshore trusts.
That data is mainly aimed at British jurisdictions such as the Cayman Islands and Virgin Islands but has also revealed some of Singapore’s more complex trusts.
As a result, Singapore announced it would assist any country which asks for help in revealing who its tax dodgers are within the confines of its own laws and tax agreements.
The announcement to sign up to FATCA was not, says Singapore’s finance ministry, a strategic shift to head off foreign criticism and that the announced changes have been planned for a long time.